loan limits

In the previous post, I mentioned how difficult it has been for me to speak with Financial planners or Advisors about Reverse Mortgages. As I noted before, even though I was a member of their trade association, NAIFA & supported a local chapter, they would not give me an opportunity to educated them on how the FHA Reverse loan program could benefit their senior clients and frankly, increase their professional image.

Everyone was polite but not interested in what I had to share.

That is finally beginning to change and I’m quite relieved about it, because if a senior or the adult child of a senior is relying on a Financial Advisors guidance in this decision, sadly they may discourage them from considering the Reverse loan as a resource for additional tax-free income.

“While reverse mortgages are most commonly taken out by low- to middle-income seniors, they’re growing in appeal among other demographics, too, said one certified financial planner, noting a trend of more affluent people using the product as a planning tool to fund long-term care and supplemental life insurance.

“Their investments have taken a big hit, and if they have needs that have to be addressed, they’re looking to their house to fund it,” said Dennis Loxton, regional vice president of the reverse mortgage division of First Century Bank in Gainesville, Ga., in the article.

The exits of big-name lenders such as Wells Fargo and Bank of America also makes the future of the program unclear, it continues, going on to mention several industry lawsuits including deceptive marketing charges and allegations of illegal foreclosure procedures against spouses of deceased borrowers.

“While these headwinds are unlikely to cause the reverse mortgage industry to disappear, in the short run they will probably have a negative impact,” says Financial Planner, going on to predict the possibility of consolidation among bigger players, tighter underwriting standards, and higher fees.

The article also explains how the program works and runs through the pros and cons of reverse mortgages.”

HUD has decided to extend the current lending limit of $625,250 for Reverse mortgages into the next fiscal year and that is very good news for everyone. There has been a debate about reducing the limit to the previous figure which was at $417,000 due to declining market conditions and if that had happened it would have had serious consequences for seniors and the Reverse loan industry.

If this had indeed occurred it would have been a serious blow to the senior community making it impossible for some to take advantage of the federal loan program because of the lower cap. Appraised values would have been capped at $417,000 instead of the current lending limit and if a senior has a large mortgage that needs to be paid off and depending on how much they could qualify for from a Reverse loan, they may not be able to do it and that would mean they would have to continue making mortgage payments that they may not be able to afford and put them at risk for foreclosure.

It is with a huge sigh of relief, to know that for at least another year we have the ability to continue to originate loans for seniors who need the higher lending limit to pay off large mortgages they may have on their property and eliminate their loan payment. And for the time being the higher limits will remain available but this could change next year and that’s why it’s important for seniors to explore this option now and not continue to wait and see what happens.

Following is an article that discusses this good news:

HUD Extends $625,250 HECM Loan Limit Through 2011

“The mortgage loan limit and max claim amount for for HECM loans will remain unchanged through December 31, according to a mortgagee letter issued today by the Department of Housing and Urban Development. ML 2011-29 specifies that the HECM loan limit of $625,500 will remain for all areas, including high-cost areas such as Alaska, Guam and the U.S. Virgin Islands.

“We’re glad to see FHA take this interim step. It eliminates uncertainty for loan applicants who might have been concerned about not getting their loans before the limits possibly dropped,” Peter Bell, National Reverse Mortgage Lenders Association president told RMD in an email. “Now, we need to focus on persuading HUD and/or Congress to retain this limit beyond calendar 2011.”

For forward mortgages, HUD states that the Federal Housing Administration will implement new single-family loan limits on October 1, which will reduce forward loan limits in the highest cost areas in the U.S., and will maintain current loan limits in most parts of the country.”

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Dear Lorraine, You began the process for me, the process of breathing again. We were both working our display booths at the Ventura County buildings; mine with the County Fire Department and you represented your advisory company. As you descibed the highlights of a Reverse mortgage to me, it dawned on me that this could be the answer to my problem, ie., how could I pay for my wife's medical condition. After that lucky meeting, I checked out your company & found out it was doing business with FHA & apparently doing so without trouble. I checked out 3 other similar agencies, all with similar track records. So- I stayed with my original choice and didn't regret it for a single moment. So I thank you once again and strongly recommend your company to any other seekers of a compassionate and willing helper. Sincerely, Raymond A. O'Grady Newbury Park, CA
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